hsbc bank malaysia berhad and its subsidiary companies ... · pdf file(incorporated in...

Domiciled in Malaysia.

Registered Office:

2, Leboh Ampang,

50100 Kuala Lumpur

31 March 2015

HSBC BANK MALAYSIA BERHAD

(Company No. 127776-V)

AND ITS SUBSIDIARY COMPANIES

(Incorporated in Malaysia)

UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

Saw Say Pin

Chief Financial Officer

Date : 24 April 2015

I hereby certify that the attached unaudited condensed interim financial statements for the financial period ended 31 March

2015 have been prepared from the Group and the Bank's accounting and other records and that they are in accordance with

the requirements of MFRS 134: Interim Financial Reporting issued by the Malaysian Accounting Standards Board ('MASB')

and the Guidelines on Financial Reporting for Banking Institutions issued by Bank Negara Malaysia in 2015.

MANAGEMENT'S CERTIFICATION



AND ITS SUBSIDIARY COMPANIES


31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

Note RM'000 RM'000 RM'000 RM'000

(Restated) (Restated)

Assets

Cash and short-term funds 11 15,554,757 7,839,057 13,390,729 8,077,960

Securities purchased under resale agreements 5,277,672 2,265,607 5,277,672 2,265,607

Deposits and placements with banks

and other financial institutions 12 780,384 2,936,713 2,599,534 4,780,622

Financial assets held for trading 13 2,991,332 2,947,082 2,971,272 2,927,027

Financial investments available-for-sale 14 14,065,221 17,103,489 11,058,272 12,968,166

Loans, advances and financing 15 46,006,276 45,433,692 34,968,878 34,753,154

Derivative financial assets 33 2,276,395 1,799,701 2,289,348 1,831,403

Other assets 17 745,169 663,033 620,686 563,960

Statutory deposits with Bank Negara Malaysia 18 1,412,760 1,479,060 1,007,398 999,998

Investments in subsidiary companies - - 660,021 660,021

Property and equipment 345,362 351,502 330,634 335,288

Intangible assets 62,659 61,603 62,658 61,601

Tax recoverable 10,136 44,711 - 35,850

Deferred tax assets 59,698 71,653 54,847 63,896

Total assets 89,587,821 82,996,903 75,291,949 70,324,553

Liabilities

Deposits from customers 19 63,888,409 61,420,015 53,336,960 50,443,855

Deposits and placements from banks

and other financial institutions 20 10,636,733 8,167,177 9,332,540 8,147,534

Bills and acceptances payable 434,768 426,346 409,248 400,637

Derivative financial liabilities 33 2,086,701 1,606,375 2,110,917 1,634,302

Other liabilities 21 2,154,125 2,092,700 2,160,252 2,074,498

Provision for taxation 10,383 - 10,383 -

Multi-Currency Sukuk Programme 22 1,754,099 1,001,854 - -

Subordinated liabilities 23 1,292,857 1,275,382 1,292,857 1,275,382

Total liabilities 82,258,075 75,989,849 68,653,157 63,976,208

Equity

Share capital 114,500 114,500 114,500 114,500

Reserves 6,915,246 6,592,554 6,224,292 5,933,845

Proposed dividend 300,000 300,000 300,000 300,000

Total equity attributable to owner of the Bank 7,329,746 7,007,054 6,638,792 6,348,345

Total liabilities and equity 89,587,821 82,996,903 75,291,949 70,324,553

Commitments and Contingencies 32 156,139,431 138,441,341 153,000,892 135,592,425

Group Bank




STATEMENTS OF FINANCIAL POSITION

AT 31 MARCH 2015

The unaudited condensed interim financial statements should be read in conjunction with the audited financial statements of the Group and Bank for the financial year ended 31 December 2014 and the accompanying explanatory notes on pages 6 to 30 attached to the unaudited condensed interim financial statements. The unaudited condensed interim financial statements were approved by the Board of Directors on 24 April 2015.

1

31 Mar 2015 31 Mar 2014 31 Mar 2015 31 Mar 2014

Note RM'000 RM'000 RM'000 RM'000

Revenue 1,132,986 1,000,278 978,882 853,348

Interest income 24 632,040 577,836 649,131 585,219

Interest expense 24 (252,054) (211,373) (252,054) (211,373)

Net interest income 24 379,986 366,463 397,077 373,846

Fee and commission income 25 123,902 118,199 123,902 118,199

Fee and commission expense 25 (11,437) (6,152) (11,437) (6,152)

Net fee and commission income 25 112,465 112,047 112,465 112,047

Net trading income 26 166,255 113,919 163,651 109,911

Income from Islamic banking operations 27 132,669 124,143 - -

Other operating income 28 9,876 7,361 42,198 40,019

Operating income before impairment losses 801,251 723,933 715,391 635,823

Loans / financing impairment charges and other credit risk provisions 29 (44,086) (22,377) (15,983) (7,629)

Net operating income 757,165 701,556 699,408 628,194

Other operating expenses 30 (360,364) (306,513) (332,209) (282,926)

Profit before tax 396,801 395,043 367,199 345,268

Tax expense (102,686) (100,276) (96,679) (88,498)

Profit for the period 294,115 294,767 270,520 256,770

Other comprehensive income / (expense)

Items that will subsequently be reclassified to profit or loss when specific conditions are met

Cash flow hedge:

Effective portion of changes in fair value - 1 - 1

Net amount transferred to profit or loss - (64) - (64)

Available-for-sale reserve:

Change in fair value 50,816 13,654 39,538 10,319

Amount transferred to profit or loss (11,330) 453 (11,330) 453

Income tax credit relating to components of other comprehensive income (9,477) (3,511) (6,770) (2,677)

Other comprehensive income/(expense) for the period, net of income tax 30,009 10,533 21,438 8,032

Total comprehensive income for the period 324,124 305,300 291,958 264,802

Profit attributable to the owner of the Bank 294,115 294,767 270,520 256,770

Total comprehensive income attributable to the owner of the Bank 324,124 305,300 291,958 264,802

Basic earnings per RM0.50 ordinary share 128.4 sen 128.7 sen 118.1 sen 112.1 sen




STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 31 MARCH 2015

Group Bank

The unaudited condensed interim financial statements should be read in conjunction with the audited financial statements of the Group and Bank for the financial year

ended 31 December 2014 and the accompanying explanatory notes on pages 6 to 30 attached to the unaudited condensed interim financial statements.

The unaudited condensed interim financial statements were approved by the Board of Directors on 24 April 2015.

2

Distributable

Group (RM'000) Capital Available- Cash Capital

Share Share Statutory Revaluation redemption for-sale flow hedge contribution Regulatory Retained Total Total

capital premium reserve reserve reserve reserve reserve reserve reserve* profit reserves Dividends equity

2015

Balance at 1 January 114,500 741,375 164,500 177,624 190,000 (10,975) - 97,757 180,000 5,052,273 6,592,554 300,000 7,007,054

Total comprehensive income for the period

Profit for the period - - - - - - - - - 294,115 294,115 - 294,115

Other comprehensive income, net of income tax

Revaluation reserve:

Transfer to retained profit upon realisation of depreciation - - - (498) - - - - - 498 - - -


Net change in fair value - - - - - 38,620 - - - - 38,620 - 38,620

Net amount transferred to profit or loss - - - - - (8,611) - - - - (8,611) - (8,611)

Total other comprehensive income - - - (498) - 30,009 - - - 498 30,009 - 30,009

Total comprehensive income for the period - - - (498) - 30,009 - - - 294,613 324,124 - 324,124

Transactions with the owner (the ultimate holding company), recorded directly in equity

Share based payment transactions - - - - - - - (1,917) - 485 (1,432) - (1,432)

Balance at 31 March 114,500 741,375 164,500 177,126 190,000 19,034 - 95,840 180,000 5,347,371 6,915,246 300,000 7,329,746

2014

Balance at 1 January 114,500 741,375 164,500 166,049 190,000 (6,871) 48 95,470 - 4,674,062 6,024,633 300,000 6,439,133






Cash flow hedge:

Net amount transferred to profit or loss - - - - - - (48) - - - (48) - (48)



Net amount transferred to profit or loss on disposal - - - - - 340 - - - - 340 - 340

Total other comprehensive income - - - (466) - 10,581 (48) - - 466 10,533 - 10,533

Total comprehensive income for the period - - - (466) - 10,581 (48) - - 295,233 305,300 - 305,300

Transfer relating to regulatory reserves - - - - - - - - 100,000 (100,000) - - -


Share based payment transactions - - - - - - - 2,731 - (1,115) 1,616 - 1,616

Balance at 31 March 114,500 741,375 164,500 165,583 190,000 3,710 - 98,201 100,000 4,868,180 6,331,549 300,000 6,746,049

* The Group and the Bank maintain a regulatory reserve to meet local regulatory requirements; the effect of this requirement is to restrict the amount of reserves that can be distributed to shareholders.

Non-distributable




UNAUDITED CONDENSED STATEMENTS OF CHANGES IN EQUITY FOR THE PERIOD ENDED 31 MARCH 2015


3

Distributable

Bank (RM'000) Capital Available- Cash Capital

Share Share Statutory Revaluation redemption for-sale flow hedge contribution Regulatory Retained Total Total

capital premium reserve reserve reserve reserve reserve reserve reserve* profit reserves Dividends equity2015

Balance at 1 January 114,500 741,375 114,500 177,624 190,000 (4,487) - 96,383 167,000 4,451,450 5,933,845 300,000 6,348,345








Net amount transferred to profit or loss - - - - - (8,611) - - - - (8,611) - (8,611)

Total other comprehensive income - - - (498) - 21,438 - - - 498 21,438 - 21,438

Total comprehensive income for the period - - - (498) - 21,438 - - - 271,018 291,958 - 291,958


Share based payment transactions - - - - - - - (1,996) 485 (1,511) - (1,511)

Balance at 31 March 114,500 741,375 114,500 177,126 190,000 16,951 - 94,387 167,000 4,722,953 6,224,292 300,000 6,638,792

2014

Balance at 1 January 114,500 741,375 114,500 166,049 190,000 (911) 48 94,178 - 4,202,012 5,507,251 300,000 5,921,751






Cash flow hedge:

Net amount transferred to profit or loss - - - - - - (48) - - - (48) - (48)



Net amount transferred to profit or loss on disposal - - - - - 340 - - - - 340 - 340

Total other comprehensive income - - - (466) - 8,080 (48) - - 466 8,032 - 8,032

Total comprehensive income for the period - - - (466) - 8,080 (48) - - 257,236 264,802 - 264,802

Transfer relating to regulatory reserves - - - - - - - - 100,000 (100,000) - - -


Share based payment transactions - - - - - - - 2,603 - (1,115) 1,488 - 1,488

Balance at 31 March 114,500 741,375 114,500 165,583 190,000 7,169 - 96,781 100,000 4,358,133 5,773,541 300,000 6,188,041

* The Bank maintains a regulatory reserve to meet local regulatory requirements; the effect of this requirement is to restrict the amount of reserves that can be distributed to shareholders.

Non-distributable




UNAUDITED CONDENSED STATEMENTS OF CHANGES IN EQUITY FOR THE PERIOD ENDED 31 MARCH 2015 (continued)


4

31 Mar 2015 31 Mar 2014 31 Mar 2015 31 Mar 2014

RM'000 RM'000 RM'000 RM'000

Profit before tax 396,801 395,043 367,199 345,268

Adjustments for non-operating and non-cash items 15,335 14,519 11,109 12,210

Operating profit before working capital changes 412,136 409,562 378,308 357,478

Changes in working capital:

Net changes in operating assets (1,965,100) (2,100,332) (1,613,017) (1,838,809)

Net changes in operating liabilities 5,505,598 1,505,221 4,666,566 810,349

Income tax paid (55,250) (87,500) (48,167) (87,500)

Net cash generated from operations 3,897,384 (273,049) 3,383,690 (758,482)

Net cash generated from/ (used in) investing activities 3,068,316 (1,136,029) 1,929,079 (800,255)

Net cash used in financing activity 750,000 - - -

3,818,316 (1,136,029) 1,929,079 (800,255)

Net changes in cash and cash equivalents 7,715,700 (1,409,078) 5,312,769 (1,558,737)

Cash and cash equivalents at 1 January 7,839,057 15,454,507 8,077,960 12,558,786

Cash and cash equivalents at 31 March 15,554,757 14,045,429 13,390,729 11,000,049

Analysis of cash and cash equivalents

Cash and short-term funds 15,554,757 14,045,429 13,390,729 11,000,049

FOR THE FINANCIAL PERIOD ENDED 31 MARCH 2015

Bank




UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

Group


5

NOTES TO THE FINANCIAL STATEMENTS

1 General Information

2 Basis of Preparation

Use this if the standard adopted during the year




HSBC Bank Malaysia Berhad (‘the Bank’) is principally engaged in the provision of banking and other related financial services. The

subsidiaries of the Bank are principally engaged in the businesses of Islamic Banking and nominee services. Islamic Banking operations refer

generally to the acceptance of deposits and granting of financing under the principles of Shariah. The Bank and its subsidiaries are collectively

known as the Group.

There were no significant changes in these activities during the financial period.

The unaudited condensed interim financial statements for the financial period ended 31 March 2015 have been prepared under the historical

cost convention except for the following assets and liabilities which are stated at fair values: financial instruments held for trading, financial

investments available-for-sale, derivative financial instruments, and financial instruments fair-valued through profit and loss.

The unaudited condensed interim financial statements for the financial period ended 31 March 2015 have been prepared in accordance with the

requirements of Malaysian Financial Reporting Standards (‘MFRS’) 134: Interim Financial Reporting issued by the Malaysian Accounting

Standards Board (‘MASB’). The unaudited condensed interim financial statements incorporate those activities relating to Islamic Banking

which have been undertaken by the Bank’s Islamic subsidiary.

The unaudited condensed interim financial statements do not include all of the information required for full annual financial statements, and

should be read in conjunction with the audited financial statements of the Group and the Bank for the financial year ended 31 December 2014.

The explanatory notes attached in the unaudited condensed interim financial statements provide an explanation of events and transactions that

are significant for an understanding of the changes in the financial position and performance of the Group and Bank since the financial year

ended 31 December 2014.

All significant accounting policies and methods of computation applied in the unaudited condensed interim financial statements are consistent

with those adopted in the most recent audited annual financial statements for the year ended 31 December 2014.

The following are accounting standards, amendments and interpretations that have been issued by the MASB but have not been adopted by the

Group and Bank as they are either not applicable or not yet effective:-

MFRSs, interpretations and amendments effective for annual periods commencing on or after 1 January 2016

- Amendments to MFRS 5, Non-current Assets Held for Sale and Discontinued Operations (Annual Improvements 2012-2014 Cycle)

- Amendments to MFRS 7, Financial Instruments: Disclosures (Annual Improvements 2012-2014 Cycle)

- Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures – Sale or

Contribution of Assets between an Investor and its Associate or Joint Venture

- Amendments to MFRS 10, Consolidated Financial Statements, MFRS 12, Disclosure of Interests in Other Entities and MFRS 128,

Investments in Associates and Joint Ventures – Investment Entities: Applying the Consolidation Exception

- Amendments to MFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations

- MFRS 14, Regulatory Deferral Accounts

- Amendments to MFRS 101, Presentation of Financial Statements – Disclosure Initiative

- Amendments to MFRS 116, Property, Plant and Equipment and MFRS 138, Intangible Assets – Clarification of Acceptable Methods of

Depreciation and Amortisation

- Amendments to MFRS 116, Property, Plant and Equipment and MFRS 141, Agriculture – Agriculture: Bearer Plants

- Amendments to MFRS 119, Employee Benefits (Annual Improvements 2012-2014 Cycle)

- Amendments to MFRS 127, Separate Financial Statements – Equity Method in Separate Financial Statements

- Amendments to MFRS 134, Interim Financial Reporting (Annual Improvements 2012-2014 Cycle) MFRSs, interpretations and amendments effective for annual periods commencing on or after 1 January 2017

- MFRS 15, Revenue from Contracts with Customers

MFRSs, interpretations and amendments effective for annual periods commencing on or after 1 January 2018

- MFRS 9, Financial Instruments (2014)

The initial application of the above accounting standards and amendments are not expected to have any material financial impact to the current

period and prior period financial statements of the Group and the Bank upon their first adoption, except as mentioned below:-

MFRS 9, Financial Instruments

MFRS 9 replaces the guidance in MFRS 139: Financial Instruments, Recognition and Measurement on the classification and measurement of

financial assets and financial liabilities, and on hedge accounting.

6

HSBC Bank Malaysia Berhad

127776-V

NOTES TO THE FINANCIAL STATEMENTS (continued)

3 Auditors' Report On Preceding Annual Financial Statements

4 Seasonality or Cyclical Factors

5 Unusual Items due to Their Nature, Size or Incidence

6 Changes in Estimates

7 Debt and Equity Securities

8 Dividend

9 Carrying Amount of Revalued Assets

10 Significant and Subsequent Events

The audit report on the audited annual financial statements for the financial year ended 31 December 2014 was not subject to any qualification.

The business operations of the Group and Bank are not subject to material seasonal or cyclical fluctuations.

There were no unusual items affecting assets, liabilities, equity, net income or cash flows of the Group and Bank for the financial period ended

31 March 2015.

The preparation of financial information requires the use of estimates. The use of available information and the application of judgement are

inherent in the formation of estimates; actual results in the future may differ from those reported. Management believes that critical accounting

policies where judgement is necessarily applied are those which relate to impairment allowances for loans, advances and financing, the

valuation of financial instruments and the impairment allowance of available-for-sale financial investments.

There were no material changes in estimates of amounts reported in prior financial years that have a material effect on the financial results and

position of the Group and Bank for the financial period ended 31 March 2015.

There were no issuances, cancellations, repurchases, resale or repayment of debt and equity securities during the financial period ended 31

March 2015, except those disclosed under Note 22.

A final dividend of RM1.31 per ordinary share amounting to RM300 million in respect of the financial year ended 31 December 2014 was paid

on 16 April 2015.

No dividend was declared subsequent to 31 March 2015.

Property and equipment are stated at cost/valuation less accumulated depreciation and impairment losses (if any) except for freehold land

which is stated at professional valuation. There was no change in the valuation of property and equipment that was brought forward from the

previous audited financial statements for the financial period ended 31 March 2015.

There were no material events subsequent to the date of the statement of financial position that require disclosure or adjustments to the

unaudited condensed interim financial statement.

7


11 Cash and Short Term Funds

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

Cash and balances with banks and other

financial institutions 1,290,167 1,354,154 1,121,267 1,183,220

Money at call and interbank placements

maturing within one month 14,264,590 6,484,903 12,269,462 6,894,740

15,554,757 7,839,057 13,390,729 8,077,960

12 Deposits and Placements with Banks and Other Financial Institutions

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

(Restated)

Licensed banks 680,524 936,713 2,499,674 2,780,622

Bank Negara Malaysia - 2,000,000 - 2,000,000

Other financial institutions 99,860 - 99,860 -

780,384 2,936,713 2,599,534 4,780,622

13 Financial Assets Held for Trading

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

At fair value RM'000 RM'000 RM'000 RM'000

Money market instruments:

Malaysian Government treasury bills 95,996 96,088 95,996 96,088

Bank Negara Malaysia bills and notes 167,947 569,163 167,947 569,163

Bank Negara Malaysia Islamic bills and notes - 1,451,961 - 1,451,961

Malaysian Government securities 2,233,634 479,451 2,233,634 479,451

Malaysian Government Islamic bonds 342,026 194,577 321,966 174,522

Islamic fixed rate bonds 8,955 8,827 8,955 8,827

Cagamas bonds and notes 23,045 7,283 23,045 7,283

2,871,603 2,807,350 2,851,543 2,787,295

Unquoted securities:

Private and Islamic debt securities 119,729 139,732 119,729 139,732

(including commercial paper) 2,991,332 2,947,082 2,971,272 2,927,027

14 Financial Investments Available-for-Sale

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

At fair value RM'000 RM'000 RM'000 RM'000

Money market instruments:

Malaysian Government treasury bills 29,924 - 29,924 -

Bank Negara Malaysia bills and notes 880,109 2,237,917 880,109 2,237,917

Bank Negara Malaysia Islamic bills 3,068,961 5,981,313 2,407,713 3,496,504

Malaysian Government securities 4,398,381 4,336,360 4,398,381 4,336,360

Malaysian Government Islamic bonds 4,065,595 3,129,628 2,146,684 1,707,988

Islamic fixed rate Sukuk 30,015 - 30,015 -

Cagamas bonds and notes 189,728 229,750 189,728 229,750

Negotiable instruments of deposit 756,814 808,944 330,024 580,070

Bankers' acceptance and Islamic accepted bills 628,315 362,198 628,315 362,198

14,047,842 17,086,110 11,040,893 12,950,787

Unquoted securities:

Shares* 16,908 16,908 16,908 16,908

Private debt securities 471 471 471 471

(including commercial paper) 17,379 17,379 17,379 17,379

14,065,221 17,103,489 11,058,272 12,968,166

BankGroup

Group Bank

BankGroup

BankGroup

*Stated at cost due to the lack of quoted prices in an active market or / and the fair values of the investments cannot be reliably

measured.

8


14 Financial Investments Available-for-Sale (continued)

The maturity structure of money market instruments held as financial investments available-for-sale is as follows:

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

Maturing within one year 6,866,918 12,229,175 5,328,872 9,415,649

More than one year to three years 6,107,677 3,847,847 5,283,778 3,164,356

More than three years to five years 775,712 803,859 130,708 165,553

Over five years 297,535 205,229 297,535 205,229

14,047,842 17,086,110 11,040,893 12,950,787

15 Loans, Advances and Financing

(i) By type

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

At amortised cost RM'000 RM'000 RM'000 RM'000

(Restated)

Overdrafts 1,126,988 1,145,597 1,042,592 1,052,389

Term loans/ financing:

Housing loans/ financing 18,330,367 18,036,318 14,384,609 14,215,572

Factoring receivables 227,574 202,751 227,574 202,751

Hire purchase receivables 239,861 234,709 183 179

Lease receivables 5,065 5,373 - -

Other term loans/ financing^ 13,238,197 12,124,505 8,395,666 7,533,131

Bills receivable 1,906,242 2,311,721 1,906,242 2,311,721

Trust receipts 1,724,207 2,051,102 1,335,031 1,692,511

Claims on customers under acceptance credits 2,604,150 2,679,153 2,000,712 2,059,895

Staff loans/ financing 191,751 271,252 184,179 263,215

Credit/ charge cards 2,749,854 2,761,988 2,238,291 2,262,168

Revolving credit 4,281,611 4,226,563 3,689,726 3,608,324

Other loans/ financing 4,670 5,240 4,670 5,240

Gross loans, advances and financing 46,630,537 46,056,272 35,409,475 35,207,096

Less: Allowances for impaired loans, advances

and financing

- Collectively assessed (414,831) (388,060) (275,890) (263,243)

- Individually assessed (209,430) (234,520) (164,707) (190,699)

Total net loans, advances and financing 46,006,276 45,433,692 34,968,878 34,753,154

^

BankGroup

BankGroup

Included in the loans, advances and financing of the Bank at 31 Dec 2014 is a Investment Agency Account ("IAA") balance amounting to

RM499.09m (Dec 2014: RM415.74m). This amount is residing under other term loans/financing.

The IAA arrangement is with the Bank's fully owned subsidiary, HSBC Amanah Malaysia Berhad ("HBMS"), and the contract is based on

the Mudharabah principle where the Bank (as the investor) solely provides capital, whilst the assets are managed by HBMS (as the agent).

The profits of the underlying assets are shared based on pre-agreed ratios, whilst risks on the financing are borne by the Bank. Hence, the

underlying assets and allowances for impairment arising thereon, if any, are recognised and accounted for by the Bank. The recognition

and derecognition treatment is in accordance to Note 3(g) on financial instruments in the audited financial statements of the Group and

Bank for the financial year ended 31 December 2014.

The accounts under the IAA are disclosed as "Assets Under Management" in the financial statements of HBMS.

9


15 Loans, Advances and Financing (continued)

(ii) By type of customer

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

(Restated)

Domestic non-bank financial institutions 452,531 441,157 40,034 48,218

Domestic business enterprises:

Small medium enterprises 8,921,651 8,792,820 6,556,948 6,834,808

Others 11,161,247 10,401,256 9,110,784 8,185,015

Government and statutory bodies 16,405 15,898 - -

Individuals 21,486,489 21,475,960 16,469,800 16,544,176

Other domestic entities 8,625 7,569 5,768 5,912

Foreign entities 4,583,589 4,921,612 3,226,141 3,588,967

46,630,537 46,056,272 35,409,475 35,207,096

(iii) By residual contractual maturity

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

(Restated)

Maturity within one year 18,060,180 19,008,204 13,954,193 14,296,962

More than one year to three years 2,764,799 2,462,824 1,968,419 2,060,725

More than three years to five years 3,205,926 2,575,614 1,983,852 1,702,259

More than five years 22,599,632 22,009,630 17,503,011 17,147,150

46,630,537 46,056,272 35,409,475 35,207,096

(iv) By interest/ profit rate sensitivity

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000


Fixed rate:

Housing loans/ financing 2,799 3,180 732 824

Hire purchase receivables 235,243 234,709 183 179

Other fixed rate loans/ financing 7,687,014 8,376,962 5,836,719 6,537,261

Variable rate:

BLR/BFR plus 23,216,060 23,177,661 18,276,961 18,334,179

Cost-plus 12,739,567 11,501,772 9,056,589 8,072,485

Other variable rates 2,749,854 2,761,988 2,238,291 2,262,168

46,630,537 46,056,272 35,409,475 35,207,096

(v) By sector

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

(Restated)

Agricultural, hunting, forestry and fishing 873,367 1,059,841 622,678 793,502

Mining and quarrying 466,094 426,246 273,821 258,451

Manufacturing 6,997,270 6,944,964 5,793,702 5,711,852

Electricity, gas and water 79,199 85,730 7,379 9,540

Construction 2,445,306 2,329,628 1,854,788 1,627,031

Real estate 2,019,905 1,698,471 1,790,323 1,460,445

Wholesale & retail trade and restaurants & hotels 3,060,007 3,154,948 2,261,965 2,361,583

Transport, storage and communication 505,407 351,263 265,488 137,821

Finance, insurance and business services 3,599,599 3,149,171 2,526,370 2,460,050

Household-retail 24,567,353 24,441,387 18,919,448 18,913,944

Others 2,017,030 2,414,623 1,093,513 1,472,877

46,630,537 46,056,272 35,409,475 35,207,096

BankGroup

Bank

BankGroup

Group

BankGroup

10


15 Loans, Advances and Financing (continued)

(vi) By purpose

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

(Restated)

Purchase of property:

Residential 18,420,637 18,308,549 14,472,134 14,485,372

Non residential 1,761,130 1,653,267 962,829 857,020

Purchase of securities 7,598 7,714 7,598 7,714

Purchase of transport vehicles 41,076 42,309 38,946 39,950

Purchase of fixed assets excluding land & building 8,994 12,716 - -

Consumption credit 5,485,182 5,457,907 4,044,916 4,008,147

Construction 2,116,920 2,329,628 1,557,451 1,627,031

Working capital 17,259,389 16,259,428 13,539,843 12,951,649

Other purpose 1,529,611 1,984,754 785,758 1,230,213

46,630,537 46,056,272 35,409,475 35,207,096

(vii) By geographical distribution

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000


Northern Region 6,767,665 6,950,812 5,414,602 5,581,975

Southern Region 6,587,076 6,397,801 5,005,679 4,868,264

Central Region 29,815,037 29,046,138 21,988,825 21,577,292

Eastern Region 3,460,759 3,661,521 3,000,369 3,179,565

46,630,537 46,056,272 35,409,475 35,207,096

The Northern region consists of the states of Perlis, Kedah, Penang, Perak, Pahang, Kelantan and Terengganu.

The Southern region consists of the states of Johor, Malacca and Negeri Sembilan.

The Central region consists of the state of Selangor and the Federal Territory of Kuala Lumpur.

The Eastern region consists of the states of Sabah, Sarawak and the Federal Territory of Labuan.

Concentration by location for loans, advances and financing is based on the location of the borrower.

16 Impaired Loans, Advances and Financing

(i) Movements in impaired loans, advances and financing

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

At beginning of period/year 688,245 792,365 526,018 625,459

Classified as impaired during the period/year 230,112 1,042,144 161,338 776,210

Reclassified as performing (108,492) (556,075) (84,262) (423,343)

Amount recovered (68,396) (374,863) (48,731) (310,591)

Amount written off (64,632) (289,199) (42,415) (191,843)

Other movements 2,913 73,873 2,243 50,126

At end of period/year 679,750 688,245 514,191 526,018

Less: Individual allowance for impairment (209,430) (234,520) (164,707) (190,699)

Collective allowance for impairment (impaired portion) (84,498) (82,829) (44,136) (41,701)

Net impaired loans, advances and financing 385,822 370,896 305,348 293,618

Group

BankGroup

Bank

Group Bank

11


16 Impaired Loans, Advances and Financing (continued)

(ii) Movements in allowances for impaired loans, advances and financing

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

Collective allowance for impairment RM'000 RM'000 RM'000 RM'000


Made during the period/year 99,094 281,197 52,137 162,585

Amount released (21,577) (69,701) (10,165) (43,828)


Other movements 127 266 51 1,140


31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

Individual allowance for impairment RM'000 RM'000 RM'000 RM'000


Made during the period/year 38,277 122,431 26,482 88,788

Amount released (46,761) (178,266) (35,284) (146,527)


Discount unwind (1,148) (2,173) (1,064) (1,713)

Other movements 4,602 34,918 2,680 25,530


(iii) By sector

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

Agricultural, hunting, forestry and fishing 930 964 930 964

Manufacturing 37,050 48,174 32,454 34,582

Electricity, gas and water - 3 - -

Construction 42,723 44,512 42,535 43,730

Real estate 589 8 589 8

Wholesale & retail trade, restaurants & hotels 51,093 71,742 47,805 68,801

Transport, storage and communication 6,268 6,440 719 770

Finance, insurance and business services 220 1,596 57 971

Household-retail 540,597 513,716 388,822 375,699

Others 280 1,090 280 493

679,750 688,245 514,191 526,018

(iv) By purpose

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000


Residential 326,557 304,763 252,436 248,800

Non residential 23,502 23,649 15,911 16,463

Purchase of securities 1 1 1 1

Purchase of transport vehicles 633 872 499 576

Consumption credit 194,200 187,622 123,181 112,948

Construction 42,539 44,512 42,351 43,730

Working capital 91,640 126,140 79,812 103,500

Other purpose 678 686 - -

679,750 688,245 514,191 526,018

Group Bank

BankGroup

BankGroup

Group Bank

12


16 Impaired Loans, Advances and Financing (continued)

(v) By geographical distribution

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

Northern Region 132,278 142,255 102,549 108,391

Southern Region 90,616 91,696 71,535 70,451

Central Region 394,456 386,431 287,546 288,451

Eastern Region 62,400 67,863 52,561 58,725

679,750 688,245 514,191 526,018

17 Other Assets

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

Interest/ income receivable 111,600 123,964 95,563 115,109

Other receivables, deposits and prepayments 633,569 539,069 525,123 448,851

745,169 663,033 620,686 563,960

18 Statutory Deposits with Bank Negara Malaysia

19 Deposits from Customers

(i) By type of deposit 31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000


Demand deposits 18,441,554 16,422,923 16,331,934 14,873,978

Savings deposits 12,410,027 11,884,375 10,969,264 10,533,204

Fixed / Investment deposits 27,340,008 27,235,752 21,470,286 21,153,190

Repurchase agreements 240,757 205,055 48,677 -

Negotiable instruments of deposit 1,288,848 1,565,790 805,965 884,379

Wholesale money market deposits 678,997 722,480 678,997 722,480

Structured investments 3,376,942 3,271,858 2,920,561 2,164,842

Others deposits 111,276 111,782 111,276 111,782

63,888,409 61,420,015 53,336,960 50,443,855

The maturity structure of fixed / investment deposits and negotiable instruments of deposit is as follows:

Due within six months 22,067,995 21,491,012 16,997,636 16,212,088

More than six months to one year 5,150,257 5,749,002 4,269,482 4,764,425

More than one year to three years 1,113,838 1,067,139 997,599 997,257

More than three years to five years 296,766 494,389 11,534 63,799

28,628,856 28,801,542 22,276,251 22,037,569

BankGroup

The non-interest bearing statutory deposits are maintained with Bank Negara Malaysia (BNM) in compliance with Section 26(2)c and

26(3) of the Central Bank of Malaysia Act 2009, the amounts of which are determined at set percentages of total eligible liabilities.

Group Bank

BankGroup

13


19 Deposits from Customers (continued)

(ii) By type of customer 31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000


Government and statutory bodies 186,660 184,994 177,096 173,440

Business enterprises 21,563,779 19,796,380 18,837,761 17,632,658

Individuals 31,102,454 30,838,842 25,259,198 24,049,006

Others 11,035,516 10,599,799 9,062,905 8,588,751

63,888,409 61,420,015 53,336,960 50,443,855

20 Deposits and Placements from Banks and Other Financial Institutions

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000


Licensed banks 573,322 434,025 573,343 434,025

Bank Negara Malaysia 36,357 19,643 17,372 -

Other financial institutions 10,027,054 7,713,509 8,741,825 7,713,509

10,636,733 8,167,177 9,332,540 8,147,534

21 Other Liabilities

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

Interest/ profit payable 285,607 253,984 226,257 193,687

Profit equalisation reserve 768 943 - -

Other creditors and accruals 1,867,750 1,837,773 1,933,995 1,880,811

2,154,125 2,092,700 2,160,252 2,074,498

Movement in allowance for commitments and contingencies is as follows:

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

At the beginning of the period/year - 13,936 - 13,936

Allowance made during the period/year - - - -

Amount released - (830) - (830)

- (830) - (830)

Other movements - (13,106) - (13,106)

At the end of the period/year - - - -

Bank

BankGroup

BankGroup

BankGroup

Group

14


22 Multi-Currency Sukuk Programme

31 Mar 2015 31 Dec 2014

RM'000 RM'000

Multi-Currency Sukuk Programme ('MCSP') 1,754,099 1,001,854

Nominal

Issuance under MCSP Value (RM'000) Issue Date Maturity Date 31 Mar 2015 31 Dec 2014

1st series at amortised cost 500,000 28-Sep-2012 28-Sep-2017 500,000 500,000

2nd series at fair value through profit and loss 500,000 16-Oct-2014 16-Oct-2019 501,781 501,854

3rd series at fair value through profit and loss 750,000 27-Mar-2015 27-Mar-2020 752,318 -

1,754,099 1,001,854

23 Subordinated Liabilities

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

Subordinated Liabilities 1,292,857 1,275,382 1,292,857 1,275,382

(i) Subordinated bonds, at par 1,000,000 1,000,000 1,000,000 1,000,000

Fair value changes arising from

fair value hedge 5,528 3,746 5,528 3,746

1,005,528 1,003,746 1,005,528 1,003,746

(a) 4.35% coupon rate for RM 500 million due 2022 callable with a 100 bp step up coupon in 2017

(b) 5.05% coupon rate for RM 500 million due 2027 callable with a 100 bp step up coupon in 2022

31 Mar 2015 31 Dec 2014 31 Mar 2015 31 Dec 2014

RM'000 RM'000 RM'000 RM'000

(ii) Subordinated term loan

- At amortised costs 287,329 271,636 287,329 271,636

287,329 271,636 287,329 271,636

Group Bank

Group

Group Bank

Carrying Value (RM'000)

The subordinated bonds qualify as a component of Tier 2 capital of the Bank. Under the Capital Adequacy Framework (Capital

Components), the par value of the subordinated bonds are amortised on a straight line basis, with 10% of the par value phased out

each year, with effect from 2013 for regulatory capital base purposes.

This is a Basel III compliant Tier 2 subordinated loan of USD equivalent of RM250 million from the Bank's immediate holding

company, HBAP (Hongkong and Shanghai Banking Corporation Limited). The Bank further invested a similar amount into HSBC

Amanah Malaysia Berhad. The tenor of the facility is 10 years with the interest payable quarterly in arrears from the utilisation date.

HSBC Amanah Malaysia Berhad, a subsidiary of the Bank, issued the following series of 5-year Sukuk under its RM3 billion MCSP:

15


24 Net Interest Income

31 Mar 2015 31 Mar 2014 31 Mar 2015 31 Mar 2014

RM'000 RM'000 RM'000 RM'000

Interest income

Loans and advances

- Interest income other than from impaired loans 406,037 387,663 406,037 387,663

- Interest income recognised from impaired loans 11,481 12,698 11,481 12,698

Money at call and deposit placements with financial institutions 103,312 130,895 120,403 138,278

Financial investments available-for-sale 111,210 46,580 111,210 46,580

632,040 577,836 649,131 585,219

Interest expense

Deposits and placements of banks and other financial institutions (34,074) (19,063) (34,074) (19,063)

Deposits from customers (202,341) (178,874) (202,341) (178,874)

Subordinated liabilities (12,969) (10,791) (12,969) (10,791)

Others (2,670) (2,645) (2,670) (2,645)

(252,054) (211,373) (252,054) (211,373)

Net interest income 379,986 366,463 397,077 373,846

25 Net Fee and Commission Income

31 Mar 2015 31 Mar 2014 31 Mar 2015 31 Mar 2014

RM'000 RM'000 RM'000 RM'000

Fee and commission income

Credit cards 44,359 43,519 44,359 43,519

Service charges and fees 51,573 37,366 51,573 37,366

Fees on credit facilities 7,755 9,208 7,755 9,208

Agency fee 11,257 13,615 11,257 13,615

Others 8,958 14,491 8,958 14,491

123,902 118,199 123,902 118,199

Fee and commission expense

Interbank and clearing fees (444) (324) (444) (324)

Brokerage (541) (580) (541) (580)

Others (10,452) (5,248) (10,452) (5,248)

(11,437) (6,152) (11,437) (6,152)

Net fee and commission income 112,465 112,047 112,465 112,047

26 Net Trading Income

31 Mar 2015 31 Mar 2014 31 Mar 2015 31 Mar 2014

RM'000 RM'000 RM'000 RM'000

Realised gains on financial assets/liabilities held for trading

and other financial instruments 36,057 3,642 36,057 3,642

Net interest income from financial assets held for trading 2,091 6,608 2,091 6,608

Net unrealised gains on revaluation of financial

assets held for trading 2,043 11,171 2,043 11,171

Net realised gains arising from dealing in foreign currency 111,149 119,055 109,903 112,480

Net unrealised gains/(losses) from dealing in foreign currency (7,935) (23,307) (7,935) (23,307)

Net realised (losses)/gains arising from dealing in derivatives (2,206) 36,251 (3,914) 36,579

Net unrealised gains/(losses) on revaluation of derivatives 26,820 (39,318) 25,308 (37,079)

(Losses)/gains arising from fair value hedges (1,764) (183) 98 (183)

166,255 113,919 163,651 109,911

BankGroup

Group

Group Bank

Bank

16


27 Income from Islamic Banking operations

31 Mar 2015 31 Mar 2014

RM'000 RM'000

Income derived from investment of depositor funds and others 169,985 150,243

Income derived from investment of shareholders funds 30,928 32,720

Income attributable to the depositors (68,244) (58,820)

132,669 124,143

28 Other Operating Income

31 Mar 2015 31 Mar 2014 31 Mar 2015 31 Mar 2014

RM'000 RM'000 RM'000 RM'000

Disposal of financial investments available-for-sale 3,349 - 3,349 -

Dividend income from financial investments available-for-sale

- Unquoted in Malaysia - 930 - 930

Rental income 1,556 1,685 1,556 1,685

Net gains on disposal of property and equipment 66 2 66 2

Other operating income 4,905 4,744 37,227 37,402

9,876 7,361 42,198 40,019

29 Loans/ Financing Impairment Charges and other Credit Risk Provisions

31 Mar 2015 31 Mar 2014 31 Mar 2015 31 Mar 2014

RM'000 RM'000 RM'000 RM'000

Impairment charges on loans and financing:

(a) Individual allowance for impairment

Made during the period 38,277 41,617 26,482 30,328

Written back (46,761) (47,468) (35,284) (38,352)

(b) Collective allowance for impairment

Made during the period 99,094 68,649 52,137 38,283

Written back (21,577) (19,596) (10,165) (9,287)

Impaired loans and financing

Recovered during the period (28,117) (21,688) (19,762) (13,980)

Written off 3,170 1,693 2,575 1,467

Impairment charges on other credit related items

Made during the period - (830) - (830)

44,086 22,377 15,983 7,629

Group

Bank

Group

Group

Bank

17


30 Other Operating Expenses

31 Mar 2015 31 Mar 2014 31 Mar 2015 31 Mar 2014

RM'000 RM'000 RM'000 RM'000

Personnel expenses 182,000 148,696 169,202 138,287

Promotion and marketing related expenses 28,621 25,651 22,193 20,575

Establishment related expenses 37,287 36,331 31,785 30,804

General administrative expenses 112,456 95,835 109,029 93,260

360,364 306,513 332,209 282,926

Personnel expenses

Salaries, allowances and bonuses 142,635 113,762 132,110 105,336

Employees Provident Fund contributions 22,038 18,474 20,377 17,128

Others 17,327 16,460 16,715 15,823

182,000 148,696 169,202 138,287

Promotion and marketing related expenses 28,621 25,651 22,193 20,575

Establishment related expenses

Depreciation of property and equipment 8,675 9,145 6,748 6,966

Amortisation of intangible assets 5,935 4,688 5,933 4,686

Information technology costs 3,267 4,351 2,284 3,608

Hire of equipment 2,850 2,891 2,850 2,889

Rental of premises 10,731 9,437 8,715 7,435

Property and equipment written off 5 2 5 2

General repairs and maintenance 521 1,647 521 1,647

Utilities 3,775 2,778 3,303 2,460

Others 1,528 1,392 1,426 1,111

37,287 36,331 31,785 30,804

General administrative expenses

Intercompany expenses 79,850 66,237 79,766 67,080

Auditors' remuneration

Statutory audit fees

PwC/ KPMG Malaysia 130 126 100 96

Other services

PwC/ KPMG Malaysia 408 233 304 165

Professional fees 1,576 2,491 1,250 2,236

Communication 4,838 5,090 4,605 4,763

Others 25,654 21,658 23,004 18,920

112,456 95,835 109,029 93,260

Group Bank

18


31 Capital Adequacy

31 Mar 2015 31 Dec 2014

RM'000 RM'000

Tier 1 capital

Paid-up ordinary share capital 114,500 114,500

Share premium 741,375 741,375

Retained profits (including proposed dividend) 5,352,273 5,352,272

Other reserves 861,531 824,618

Regulatory adjustments (568,655) (558,088)

Total Common Equity Tier 1 (CET 1) and Tier 1 capital 6,501,024 6,474,677

Tier 2 capital

Subordinated liabilities 700,000 800,000

Subordinated term loan 287,329 271,636

Collective impairment allowance (unimpaired portion) & regulatory reserves 510,333 485,231

Regulatory adjustments 92,766 93,061

Total Tier 2 capital 1,590,428 1,649,928

Capital base 8,091,452 8,124,605

Inclusive of proposed dividend

CET 1 and Tier 1 Capital ratio 11.679% 12.229%

Total Capital ratio 14.536% 15.345%

Net of proposed dividend



Breakdown of gross risk-weighted assets ('RWA') in the various categories of risk-weights:

Principal Risk-weighted Principal Risk-weighted

RM'000 RM'000 RM'000 RM'000

Total RWA for credit risk 104,001,964 * 48,048,308 * 96,267,040 * 45,497,242 *

Total RWA for market risk - 1,877,521 - 1,738,308

Total RWA for operational risk - 5,737,751 - 5,711,241

104,001,964 55,663,580 96,267,040 52,946,791

*

Group

31 Dec 2014

Group

31 Mar 2015

The total capital and capital adequacy ratios of the Group have been computed based on the Standardised Approach in accordance with the

Capital Adequacy Framework (Capital Components).

For HSBC Amanah Malaysia Berhad (a fully owned subsidiary of the Bank), the total capital and capital adequacy ratios have been

computed in accordance with the Capital Adequacy Framework for Islamic Banks (CAFIB). HSBC Amanah Malaysia Berhad has adopted

the Standardised Approach for Credit Risk and Market Risk, and the Basic Indicator Approach for Operational Risk.

The principal and risk weighted amount for credit risk relating to the IAA (refer Note 15(i) for more details) is RM873.38m for both on 31

December 2014 (2014: RM415.74m).

19


31 Capital Adequacy (continued)

31 Mar 2015 31 Dec 2014

RM'000 RM'000

Tier 1 capital

Paid-up ordinary share capital 114,500 114,500

Share premium 741,375 741,375

Retained profits (including proposed dividend) 4,751,450 4,751,450

Other reserves 794,337 768,781


Total Common Equity Tier 1 (CET1) and Tier 1 capital 5,589,175 5,701,688

Tier 2 capital

Subordinated liabilities 700,000 800,000

Subordinated term loan 287,329 271,636

Collective impairment allowance (unimpaired portion) & regulatory reserves 398,754 388,542


Total Tier 2 capital 795,507 753,586

Capital base 6,384,682 6,455,274

Inclusive of proposed dividend



Net of proposed dividend



Breakdown of gross RWA in the various categories of risk-weights:

Principal Risk-weighted Principal Risk-weighted

RM'000 RM'000 RM'000 RM'000

Total RWA for credit risk 86,319,396 * 37,998,093 * 80,460,467 * 36,254,715 *

Total RWA for market risk - 1,773,197 - 1,627,955

Total RWA for operational risk - 5,119,324 - 5,079,063

86,319,396 44,890,614 80,460,467 42,961,733

*

31 Mar 2015 31 Dec 2014

Bank

Bank

The total capital and capital adequacy ratios have been computed based on the Standardised Approach in accordance with the Capital

Adequacy Framework (Capital Components).

The principal and risk weighted amount for credit risk relating to the IAA (refer Note 15(i) for more details) is RM873.38m for both on 31

December 2014 (2013: RM415.74m).

20


32 Commitments and Contingencies

31 March 2015

Credit Credit Risk

Principal equivalent weighted

amount amount* amount*

RM'000 RM'000 RM'000

Direct credit substitutes 2,365,869 2,365,869 1,798,854

Transaction-related contingent items 8,269,728 4,134,864 3,076,408

Short-term self-liquidating trade-related contingencies 357,734 71,547 62,779

Irrevocable commitments to extend credit:

- Maturity not exceeding one year 15,518,197 3,103,639 2,769,475

- Maturity exceeding one year 10,581,031 5,290,516 4,798,463

Unutilised credit card lines 8,095,340 1,619,068 1,214,301

Foreign exchange related contracts:

- Less than one year 53,886,826 1,862,126 883,357

- Over one year to less than five years 9,849,256 1,510,267 697,479

- Over five years 3,465,993 606,868 254,747

Interest/profit rate related contracts:

- Less than one year 8,405,648 25,240 8,856

- Over one year to less than five years 29,660,320 811,385 267,262

- Over five years 2,870,738 233,677 80,706

Gold and other precious metals contracts:

- Less than one year 11,036 - -

Equity related contracts:

- Less than one year 442,020 29,251 5,766


156,139,431 21,855,755 15,953,040

of which the amount related to IAA arrangement (refer Note 15(i) for more detail) are as below:


- Maturity not exceeding one year 669,429 133,886 133,886

- Maturity exceeding one year 480,805 240,403 240,403

^

*

Group

The credit equivalent and risk weighted amounts are computed using credit conversion factors and risk weighting rules as per Bank

Negara Malaysia guidelines. The credit conversion factors and risk weighting rules for the Bank were based on the guidelines of the

Capital Adequacy Framework on the Standardised Approach. The credit conversion factors and risk weighting rules for HSBC

Amanah Malaysia Berhad were based on the Basel II Capital Adequacy Framework for Islamic Bank (CAFIB).

The foreign exchange and equity related contracts, interest/profit rate related contracts, gold and other precious metals contracts are off-balance sheet derivative financial instruments whose values change in response to changes in prices or rates (such as foreign exchange rates, interest/profit rates and commodities price) of the underlying instruments. The table above shows the Group's derivative financial instruments at the statement of financial position date. The underlying principal amount of these derivative financial instruments and their corresponding gross positive (derivative financial asset) fair values at the statement of financial position date are shown above.

The table below shows the contracts or underlying principal amounts, credit equivalent amounts and risk weighted amounts of

unmatured off-balance sheet transactions at the statement of financial position date. The underlying principal amounts indicate the

volume of business outstanding and do not represent amounts at risk.

21


32 Commitments and Contingencies (continued)

31 December 2014

Credit Credit Risk



RM'000 RM'000 RM'000











- Over five years 3,354,844 528,333 264,683

Interest/profit rate related contracts:



- Over five years 2,568,230 217,844 90,586






138,441,341 19,385,859 14,378,202

^

*

Group

The foreign exchange and equity related contracts, interest/profit rate related contracts, gold and other precious metals contract are off-balance sheet derivative financial instruments whose values change in response to changes in prices or rates (such as foreign exchange rates, interest/profit rates and commodities price) of the underlying instruments. The table above shows the Group's derivative financial instruments at the statement of financial position date. The underlying principal amount of these derivative financial instruments and their corresponding gross positive (derivative financial asset) fair values at the statement of financial position date are shown above.

Of the amounts included in the Commitment and Contingencies balances above, none relate to the IAA arrangement (refer Note 15(i)

for more details).

The table below shows the contracts or underlying principal amounts, credit equivalent amounts and risk weighted amounts of unmatured

off-balance sheet transactions at the statement of financial position date. The underlying principal amounts indicate the volume of

business outstanding and do not represent amounts at risk.


Negara Malaysia guidelines. The credit conversion factors and risk weighting rules for the Bank were based on the guidelines of the

Capital Adequacy Framework on the Standardised Approach. The credit conversion factors and risk weighting rules for HSBC

Amanah Malaysia Berhad were based on the Basel II CAFIB.

22



31 March 2015

Credit Credit Risk



RM'000 RM'000 RM'000











- Over five years 3,465,993 606,868 254,747

Interest rate related contracts:



- Over five years 2,870,738 233,677 80,706






153,000,892 18,913,192 13,618,770

of which the amount related to IAA arrangement (refer Note 15(i) for more detail) are as below:


- Maturity not exceeding one year 669,429 133,886 133,886

- Maturity exceeding one year 480,805 240,403 240,403

^

*

Bank


Negara Malaysia guidelines. The credit conversion factors and risk weighting rules were based on the guidelines of the Capital

Adequacy Framework on the Standardised Approach.

The foreign exchange and equity related contracts, interest rate related contracts, gold and other precious metals contracts are off-balance sheet derivative financial instruments whose values change in response to changes in prices or rates (such as foreign exchange rates, interest rates and commodities price) of the underlying instruments. The table above shows the Bank's derivative financial instruments at the statement of financial position date. The underlying principal amount of these derivative financial instruments and their corresponding gross positive (derivative financial asset) fair values at the statement of financial position date are shown above.

The table below shows the contracts or underlying principal amounts, credit equivalent amounts and risk weighted amounts of

unmatured off-balance sheet transactions at the statement of financial position date. The underlying principal amounts indicate the

volume of business outstanding and do not represent amounts at risk.

23



31 December 2014

Credit Credit Risk



RM'000 RM'000 RM'000







Unutilised credit card lines 6,603,881 1,320,776 990,582




- Over five years 3,354,844 528,333 264,683

Interest rate related contracts:



- Over five years 2,568,230 217,844 90,586






135,592,425 16,845,256 12,307,113

^

*

Bank

The foreign exchange and equity related contracts, interest rate related contracts, gold and other precious metals contracts are off-balance sheet derivative financial instruments whose values change in response to changes in prices or rates (such as foreign exchange rates, interest rates and commodities price) of the underlying instruments. The table above shows the Bank's derivative financial instruments at the statement of financial position date. The underlying principal amount of these derivative financial instruments and their corresponding gross positive ( derivative financial asset ) fair values at the statement of financial position date are shown above.

Of the amounts included in the Commitment and Contingencies balances above, none relate to the IAA arrangement (refer Note 15(i)

for more details).

The table below shows the contracts or underlying principal amounts, credit equivalent amounts and risk weighted amounts of unmatured

off-balance sheet transactions at the statement of financial position date. The underlying principal amounts indicate the volume of

business outstanding and do not represent amounts at risk.


Negara Malaysia guidelines. The credit conversion factors and risk weighting rules were based on the guidelines of the Capital

Adequacy Framework on the Standardised Approach.

24


33 Derivative Financial Instruments

Details of derivative financial instruments outstanding are as follows:

i) Derivative financial instruments measured at their fair values together with their corresponding contract/notional amounts:

Group Up to 1 Year > 1 - 5 Years > 5 Years Total Up to 1 Year > 1 - 5 Years > 5 Years Total Up to 1 Year > 1 - 5 Years > 5 Years Total

At 31 March 2015 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000

Trading derivatives:

Foreign exchange contracts

- Forwards 49,999,165 800,227 - 50,799,392 874,141 40,472 - 914,613 844,144 4,919 - 849,063

- Swaps 2,599,335 9,295,672 3,202,957 15,097,964 168,930 744,032 229,142 1,142,104 168,819 651,494 172,657 992,970

- Options 1,114,801 189,918 - 1,304,719 25,571 19,581 - 45,152 s - - -

Interest/profit rate related contracts

- Options 120,000 481,997 96,250 698,247 - 16,442 801 17,243 2,161 438 - 2,599

- Swaps 8,018,647 27,430,325 2,774,487 38,223,459 11,295 90,604 38,320 140,219 10,317 118,209 49,525 178,051

Equity related contracts

- Options 442,019 2,359,696 - 2,801,715 2,717 837 - 3,554 19,721 36,213 - 55,934

Precious metal contracts

- Options 11,036 - - 11,036 - - - - 23 - - 23

Sub- total 62,305,003 40,557,835 6,073,694 108,936,532 1,082,654 911,968 268,263 2,262,885 1,045,185 811,273 222,182 2,078,640

Hedging Derivatives:

Fair Value Hedge


- Swaps 340,000 1,675,000 - 2,015,000 1,175 12,335 - 13,510 - - - -

Sub- total 340,000 1,675,000 - 2,015,000 1,175 12,335 - 13,510 - - - -

Total 62,645,003 42,232,835 6,073,694 110,951,532 1,083,829 924,303 268,263 2,276,395 1,045,185 811,273 222,182 2,078,640

Contract / Notional Amount Positive Fair Value Negative Fair Value

25


33 Derivative Financial Instruments (continued)

Details of derivative financial instruments outstanding are as follows (continued):

i) Derivative financial instruments measured at their fair values together with their corresponding contract/notional amounts (continued):

Group Up to 1 Year > 1 - 5 Years > 5 Years Total Up to 1 Year > 1 - 5 Years > 5 Years Total Up to 1 Year > 1 - 5 Years > 5 Years Total

At 31 December 2014 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000



- Forwards 37,403,278 545,277 - 37,948,555 708,822 19,763 - 728,585 636,207 5,986 - 642,193

- Swaps 3,263,913 8,690,296 3,091,809 15,046,018 147,588 539,932 168,296 855,816 136,946 462,798 121,306 721,050

- Options 840,536 182,692 - 1,023,228 25,012 12,620 - 37,632 5,490 - - 5,490


- Options 100,000 661,623 - 761,623 - 14,111 - 14,111 - 5,753 - 5,753

- Swaps 8,420,161 26,314,318 2,568,230 37,302,709 8,212 94,342 33,132 135,686 12,195 114,699 37,326 164,220


- Options 491,934 2,368,048 - 2,859,982 2,581 6,584 - 9,165 22,110 45,512 - 67,622


- Options 11,978 - - 11,978 20 - - 20 47 - - 47

Sub- total 50,531,800 38,762,254 5,660,039 94,954,093 892,235 687,352 201,428 1,781,015 812,995 634,748 158,632 1,606,375


Fair Value Hedge


- Swaps 340,000 1,595,000 - 1,935,000 1,752 16,934 - 18,686 - - - -

Sub- total 340,000 1,595,000 - 1,935,000 1,752 16,934 - 18,686 - - - -

Total 50,871,800 40,357,254 5,660,039 96,889,093 893,987 704,286 201,428 1,799,701 812,995 634,748 158,632 1,606,375


26





Bank Up to 1 Year > 1 - 5 Years > 5 Years Total Up to 1 Year > 1 - 5 Years > 5 Years Total Up to 1 Year > 1 - 5 Years > 5 Years Total

At 31 March 2015 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000



- Forwards 51,079,513 800,227 - 51,879,740 881,344 40,472 - 921,816 858,080 4,919 - 862,999

- Swaps 2,599,335 9,295,672 3,202,957 15,097,964 168,930 738,666 229,142 1,136,738 168,819 651,584 172,657 993,060

- Options 1,150,464 189,918 - 1,340,382 25,574 19,581 - 45,155 9,408 - - 9,408

Interest rate related contracts

- Options 120,000 739,985 96,250 956,235 - 17,792 801 18,593 2,161 469 - 2,630

- Swaps 8,088,648 30,075,324 2,774,487 40,938,459 11,296 93,610 38,320 143,226 10,487 124,673 49,525 184,685


- Options 555,754 2,640,555 - 3,196,309 6,968 3,342 - 10,310 21,185 36,927 - 58,112


- Options 11,036 - - 11,036 - - - - 23 - - 23

Sub- total 63,604,750 43,741,681 6,073,694 113,420,125 1,094,112 913,463 268,263 2,275,838 1,070,163 818,572 222,182 2,110,917


Fair Value Hedge


- Swaps 340,000 1,675,000 - 2,015,000 1,175 12,335 - 13,510 - - - -

Sub- total 340,000 1,675,000 - 2,015,000 1,175 12,335 - 13,510 - - - -

Total 63,944,750 45,416,681 6,073,694 115,435,125 1,095,287 925,798 268,263 2,289,348 1,070,163 818,572 222,182 2,110,917


27





Bank Up to 1 Year > 1 - 5 Years > 5 Years Total Up to 1 Year > 1 - 5 Years > 5 Years Total Up to 1 Year > 1 - 5 Years > 5 Years Total

At 31 December 2014 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000 RM'000



- Forwards 38,112,437 545,277 - 38,657,714 708,075 19,763 - 727,838 650,580 5,986 - 656,566

- Swaps 3,263,914 8,690,295 3,091,809 15,046,018 147,588 534,150 168,296 850,034 136,946 462,798 121,306 721,050

- Options 857,654 182,692 - 1,040,346 25,335 12,620 - 37,955 7,452 - - 7,452


- Options 100,000 1,037,884 - 1,137,884 - 20,742 - 20,742 - 5,753 - 5,753

- Swaps 8,450,159 28,259,318 2,568,230 39,277,707 8,213 100,089 33,132 141,434 12,207 121,932 37,326 171,465


- Options 562,740 3,340,508 - 3,903,248 4,891 29,803 - 34,694 23,549 48,420 - 71,969


- Options 11,978 - - 11,978 20 - - 20 47 - - 47

Sub- total 51,358,882 42,055,974 5,660,039 99,074,895 894,122 717,167 201,428 1,812,717 830,781 644,889 158,632 1,634,302


Fair Value Hedge


- Swaps 340,000 1,595,000 - 1,935,000 1,752 16,934 - 18,686 - - - -

Sub- total 340,000 1,595,000 - 1,935,000 1,752 16,934 - 18,686 - - - -

Total 51,698,882 43,650,974 5,660,039 101,009,895 895,874 734,101 201,428 1,831,403 830,781 644,889 158,632 1,634,302


28


34 Performance Review

35 Business Prospects

The Malaysian economy registered a strong growth of 5.8% in 4Q 2014, bringing an annual growth of 6.0% (2013: 4.7%), which is higher

than the initial forecast of 4.5%-5.5% for 2014. Growth was driven by stronger private sector expenditure of 8.5%, and a turnaround in

public sector spending.

Growth in private investment has expanded at a faster pace of 11.2%, driven by capital spending in the manufacturing and services sectors,

particularly in the transport and retail industries. Private consumption grew stronger by 7.8%, supported by stable labour market conditions

and continued wage growth. Growth in public consumption has registered a positive growth of 0.6%, reflecting slower decline in

investment, amid the moderation in public consumption. On the supply side, growth was sustained by the major economic sectors,

supported by trade and domestic activities.

For 2014, inflation averaged 3.2% (2013: 2.1%) and projected to be above its long-term average for 2015 due to domestic cost factors.

Monetary Policy Committee has decided to maintain the Overnight Policy Rate (OPR) at 3.25%. The current stance of monetary policy

remains accommodative and is assessed to be appropriate given the developments in monetary and financial conditions.

Besides growing concerns on the prospects of global growth, regional currencies also faced depreciation pressure due to the strengthening of

the US dollar, which was driven by the expectations of interest rate normalisation by the Fed amid the recovery in the US economy.

However, the ringgit has depreciated more than other regional currencies, especially in December 2014, following heightened market

concerns on the impact of the sharp fall in oil prices on the Malaysia economy, particularly on the Government’s fiscal position.

The Group’s priorities in 2015 remain unchanged, to leverage on our increased resource investments into the business, grow both the

business and dividends with new distribution channels and increased productivity across existing channels, implement the highest global

standards of conduct and compliance, and streamline processes and procedures for the benefit of the customers. The Group will continue to

invest in Premier and Advance propositions and expanding its wealth management offerings. Leveraging on HSBC Group expertise, the

Group is able to provide holistic banking service solutions to our existing and new corporate customers. Further, the Group will capitalise

on the HSBC Group’s international connectivity for cross border trade initiatives and offer banking services for inbound investments by

HSBC Group customers into Malaysia.

The Group has adopted the relationship based approach (as opposed to the product push approach) for a number of years and this journey

will continue.

The Group recorded profit before tax of RM397 million for the period ended 31 March 2015. Total revenue posted for the period was

RM1,133 million, an increase of 13.3% or RM133 million compared against history. The higher profit was due to higher operating

income of RM77 million, mitigated by higher operating expenses of RM54 million, higher loan/financing impairment charges of RM22

million.

Higher operating income was primarily due to higher net trading income (+RM52 million or 45.9%), on higher gain from derivatives,

debt securities, foreign exchange. Higher volatility in the market had increased higher demand of Ringgit securities, as well as revaluation

gain made on government bonds portfolio following the decrease in bond yield. Meanwhile, net interest income improved (+RM14

million or 3.7%), in tandem with the growth in average customer advances.

Operating expenses grew, on higher intragroup expenses, higher personnel expenses, and larger promotion and marketing expenses.

Loan/financing impairment charges increased, primarily due to higher collective impairment provisions related to local risk adjustments.

The Group's capital and liquidity ratios remain strong and well above regulatory requirements.

Total balance sheet size at 31 March 2015 stood at RM89.6 billion, RM6.6 billion higher compared against 31 December 2014 (RM83.0

billion), mainly on higher deposits from customers, banks and other financial institutions, which were deployed into securities and

investments.

29


36 Comparative Figures

Statement of Financial Position at 31 December 2014

RM'000 RM'000 RM'000 RM'000

As restated As previously As restated As previously

stated stated

(a) Loans, advances and financing 45,433,692 45,260,697 - -

(of which the affected components are disclosed below) :

By type

Term loans/ financing:

Housing loans/ financing 18,036,318 17,524,631 - -

Other term loans/ financing 12,124,505 12,423,345 - -

Staff loans/ financing 271,252 311,104 - -

By type of customer

Foreign entities 4,921,612 4,748,617 - -

By interest/ profit rate sensitivity

Fixed rate:

Housing loans/ financing 3,180 128,471 824 121,524

Other fixed rate loans/ financing 8,376,962 4,060,557 6,537,261 2,149,926

Variable rate:

BLR/BFR plus 23,177,661 34,467,990 18,334,179 27,064,976

Cost-plus 11,501,772 4,229,562 8,072,485 3,608,323

By sector

Others 2,414,623 2,241,628 - -

By purpose


Residential 18,308,549 17,517,122 - -

Non residential 1,653,267 1,183,472 - -

Consumption credit 5,457,907 6,249,334 - -

Working capital 16,259,428 16,729,223 - -

Other purpose 1,984,754 1,811,759 - -

By geographical distribution

Northern Region 6,950,812 7,516,532 5,581,975 6,147,695

Southern Region 6,397,801 6,363,471 4,868,264 4,833,934

Central Region 29,046,138 28,340,052 21,577,292 21,044,201

Eastern Region 3,661,521 3,663,222 3,179,565 3,181,266

46,056,272 45,883,277 35,207,096 35,207,096

(b) Deposits and placements with banks and other financial institutions 2,936,713 3,109,649 - -


Licensed banks 936,713 1,109,649 - -

(c) Deposits from customers 61,420,015 61,308,233 50,443,855 50,332,073


By type of deposit

Other Deposits 111,782 - 111,782 -

By type of customer

Government and statutory bodies 184,994 73,212 173,440 61,658

(d) Deposits and placements from banks and other financial institutions 8,167,177 8,278,959 8,147,534 8,259,316


Other financial institutions 7,713,509 7,825,291 7,713,509 7,825,291

Group Bank

The presentation and classification of items in the current interim financial statements are consistent with the previous financial period except

those listed below. The restatement of 31 Dec 2014 financial data in relation to (a) and (b) is a result of an initiative rolled out by the Group and

the Bank in Q1 2015 to align financial reporting data with Central Credit Reference Information System (CCRIS) data. Similar reclassification is

made to 31 Dec 2014 data so that they are comparable to 31 Mar 2015 data. The Group's and the Bank's prior period profit and loss and retained

earning brought forward are not affected by these reclassifications.

30

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